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R.I.P. Swiss Bank Secrecy
Several times over the last few years in my blog writings I have posed the question: “Is Swiss bank secrecy dead? “
Until now I have been able to answer, with varying degrees of temporary assurance, that the answer to that question was “No!”
Not any longer, dear readers.
The Swiss Sunday newspaper Der Sonntag in Zurich reported (9/28) that the Swiss government may be about to authorize a large-scale transfer of Credit Suisse client data to the United States government in order to avoid serious legal troubles that could endanger the bank’s future.
The newspaper quoted from an unpublished report to the Swiss Parliament on the 2009 revised double taxation agreement with the United States. The report suggested that the treaty can be interpreted by the Swiss to allow U.S. authorities to obtain U.S. client data without clearly identifying suspected tax dodgers by name. It appears that may include both U.S. bank account holders and Americans with Swiss insurance and annuity policies that serve as investment wrappers.
If this report is true it is far more than a replay of the ugly UBS tax evasion scandal in which the Swiss government was forced change its laws and allow UBS to turn over 4,450 names of suspected U.S. tax evaders. In the UBS mess named individuals and specific accounts were involved.
Fishing Expeditions
If the Swiss allow this broad interpretation it would amount to nothing less than permitting a U.S. government “fishing expedition” in Credit Suisse records, something the Swiss government has repeatedly and loudly proclaimed they would never do – and an action it assured the world that the 2009 U.S.-Swiss revised tax treaty did not permit.
Der Sonntag reported that the Swiss government has so far rejected the IRS demand for anonymous mass requests for client data but said they may now have to make further concessions as the U.S. noose tightens on Credit Suisse.
“In these requests, people are not identified directly via a name or an insurance number but via a behavioral pattern,” the government said the report which will be submitted to the Swiss parliament this autumn.
Yes, some of these Americans may be tax evaders and they should be brought to justice. But to allow the IRS to rummage through all U.S. client accounts at any given bank based on IRS-created “behavioral patterns” makes a mockery of Swiss financial privacy. The basic IRS assumption is and has been that any American with an offshore account is probably engaged in tax evasion. One can assume that any American with a Credit Suisse account, innocent or otherwise, will be added to the IRS audit lists.
Talks Get Nowhere
As I reported to you a month ago “…ever since the final UBS-IRS tax evasion settlement in August 2010 official Swiss and U.S. Department of Justice (DOJ) negotiators have been talking. Topic: the continuing U.S. tax evasion investigation of other Swiss banks, chief among them Switzerland’s second biggest behemoth bank, Credit Suisse.”
In recent months U.S. DOJ authorities have indicted seven Credit Suisse private bankers for allegedly helping Americans evade taxes. The latest U.S. indictment alleges that as of late 2008, Credit Suisse “maintained thousands of secret accounts for U.S. customers with as much as $3 billion.”
Appeasement History
Last year in September 2010 I explained how far the Swiss banks were forced to appease the U.S. government in the UBS tax evasion scandal that began in 2008 under pain of closing operations in the U.S. where UBS employs over 20,000 people.
At the time the Swiss cabinet adopted a revised policy they insisted would forbid foreign tax collectors to engage in “fishing expeditions.” It also insisted tax information requests would have to include the accused tax evaders name, Swiss bank, and specific account identification.
Later the Bern government announced that to release information a proper request had to meet the following conditions: the foreign tax authority must submit a written request, indicating sufficient grounds for suspicion of tax evasion or tax fraud; the taxable person must be identified in the request; the facts of the tax evasion must be adequately described; a specific bank or branch must be named.
Five months later this seemingly strict information access policy was weakened to allow a request to be based on nothing more than a bank account number. By all reports this further surrender was motivated by the Swiss government’s fear of being put back on an OECD black or grey list, a point the finance minister openly admitted at the time.
Political Smoke Screen
Meanwhile last week the current Swiss president, Micheline Calmy-Rey, may have been engaging in a typical political smoke screen to cover what may be the pending Swiss government surrender to the IRS.
In a speech in Lucerne she said the way U.S. tax authorities are seeking information from Switzerland on alleged tax evasion by Americans is “…too drawn out, legally unacceptable or politically unjustifiable.”
If the Der Sonntag report is correct the Swiss president and her colleagues in the governing Swiss Federal Council can no longer pretend that they will preserve what little may remains of Switzerland’s once prized tradition of banking secrecy.
The Swiss government has come a long way down hill in a short time; from defending absolute financial privacy under the 1934 Bank Secrecy Act, (still the law more than a year ago) to who knows what tomorrow?
The total cost of the Swiss government’s calculated political and economic decision to defend UBS and Credit Suisse may include a permanent loss of confidence in Switzerland as a reliable defender of financial privacy. It could also cost them billions in deposits.
But no doubt the Swiss concluded, quite rightly, where else is that disappointed foreign cash going to go?
And So….?
Let’s face it; absolute financial privacy is dead everywhere these days, but the best that Switzerland has to offer still remains; profitable investment banking, annuities, life insurance, experienced independent investment managers. We know who they are and we work with them.
At the Sovereign Society we have agreements with reputable Swiss and many other offshore banks willing to accept accounts from our U.S. and other members. These arrangements are in full compliance with IRS and SEC rules and other U.S. laws.
As it has been since our founding 14 years ago, our staff is available to assist our members in opening a Swiss or other offshore account. Take advantage of these special banking arrangements and the advice of our offshore advisers — sign up here for Sovereign Society membership. Once you are a member, you can contact us for help via email at info@sovereignsociety.com
For new subscribers to my new monthly Offshore Confidential, the July issue was a special report on offshore banking, entitled “The Cornerstone of Your Financial Strategy.” We’ll send it to you along with a complete list of offshore banks and financial managers in more than 20 countries that accept accounts from our U.S. and other members. Click here.
Other Posts from the Author
- Are You Among the 23% Entitled to a Second Passport? - May 14th, 2012
- The Real Problem With the French Elections - May 4th, 2012
- The Life of a “Sovereign Individual” - April 24th, 2012
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